By ELISABETH MALKIN


MEXICO CITY - Twice in the last three decades, Mexico has demonstrated that one country’s profligacy and mismanagement can spell economic catastrophe beyond its borders.

In 1982, the country defaulted on its foreign debt and set off a Latin American debt crisis that led to a decade of anemic growth across the region. In 1994, the peso collapsed and halted capital flows to emerging markets around the world, until the Clinton administration arranged a $50 billion Mexican bailout.

But this recession, it is the profligate United States pulling down fiscally disciplined Mexico.

Like a host of middle-class countries, from South Africa to Brazil, Mexico is credited by economists with prudent economic policies that reduced debt and tamed inflation, but that has not saved any of them from the pain of a global recession. Billions of dollars have been pulled from emerging markets as investors seek the safest haven, which is still considered to be United States Treasury bills.

When the American economy began to spiral downward, officials here argued that Mexico’s hard-won macroeconomic stability would protect it.

Now, as each week brings more bad news from the United States, those forecasts seem quaintly optimistic. The North American Free Trade Agreement, or Nafta, which so tightly bound Mexico and the United States, is helping drag Mexico down with the United States just as it helped bolster it when times were good north of the border.

When the American economy was growing, successive governments in Mexico counted on foreign investment and exports to generate growth. Exports account for almost a third of Mexico’s gross domestic product. But more than 80 percent of them go to the United States .

“In the face of the most serious contraction in decades, it is hard to imagine that Mexico will avoid recession too,”said Gray Newman, Latin American economist for Morgan Stanley in New York.

The effect on Mexico is becoming clear. Unemployment is at the highest level in eight years. The peso has fallen 25 percent, leading to a spike in the price of imports, hurting consumers and businesses that reply on imported goods. Exports, industrial production and retail sales have all fallen in the last few months.

Although the government has yet to change its growth forecast of 1.8 percent for next year, private analysts say Mexico’s economy will not grow at all in 2009. In the worst case, the economy could contract as much as 1.7 percent, according to BBVA Bancomer, Mexico’s largest bank.

Bad economic news dominates the media. Every morning for the last few weeks, the influential radio journalist Carlos Puig has invited business owners to call in and describe their troubles.“The last thing we Mexicans lose is hope,”said one caller, Faustina Garcia, manager of a small building supplies company, Bester Mexicana, before beginning a plea for government aid.

After a decade of sound economic management, Mexico’s government does have some room to maneuver. This year the government will run its first budget deficit in five years as it increases spending to give the economy a push. The central bank has almost $85 billion in reserves to defend the peso and room to bring down interest rates.

But if Mexico’s economy contracts, tax revenue will most likely fall.

Over the last few years, Mexico and Latin America have finally managed to achieve some success in reducing poverty.

“There have been substantial gains by the main Latin American countries from the mid-1990s to 2006,”said Santiago Levy, a vice president at the Inter-American Development Bank in Washington, who started the Mexican program 11 years ago.“It would be very, very sad if this was lost.”